Audit Scotland resisting £4.1m VAT claim

Audit Scotland is fighting a £4.1m claim from HMRC for VAT the tax department says was wrongfully recovered on subcontracted local government audit work carried out accountancy firms.

In a letter to the Scottish Commission for Public Audit (SCPA), a committee of the Scottish Parliament that oversees the public sector audit watchdog, auditor general for Scotland Caroline Gardner explained, “Since 2006 the Accounts Commission has had an agreement with HMRC that allows it to recover input VAT on local authority work.

“The agreement recognises the Accounts Commission as [a] body similar to a local authority. Audit Scotland administers this VAT recovery on behalf of the Accounts Commission and in the past two weeks HMRC has now challenged the agreement suggesting that the input tax recovered since the start of the agreement (£4.1m) should be repaid.”